Daimler moving IT in-house

Daimler is planning to make savings of €150m a year by bringing IT services in-house and expanding its IT operations in India and Turkey

German car manufacturer Daimler is planning to make savings of €150m a year by bringing IT services in-house and expanding its IT operations in India and Turkey.

This follows US car maker General Motors’ (GM) announcement that it was bringing its heavily outsourced IT back in-house and a report that US manufacturing giant Procter & Gamble is considering moving outsourced work in-house in a bid to retain control of IT that can affect its competitiveness.>

According to a report in German magazine Automobilwoche, a board member at Daimler said the company has a target to save €150m by the end of 2016 and that the company is well on the way to doing this.

The magazine also reported that Daimler's CIO plans to expand its IT services in India and Turkey. The move includes taking SAP services in-house and setting up an SAP services unit in India (Bangalore) with 700 workers.

Peter Schumacher, CEO at management consultancy Value Leadership Group said  the strategy underlines some of the advantages that offshore-based services offer. 

“Our discussions with CIOs across Europe confirm that many are eager to expand their usage of offshore-based service models," said Schumacher.

“The Bangalore IT and R&D cluster has matured and is unique globally in terms of its size and availability of world-class talent and capabilities across a broad portfolio of disciplines.”

Last year, General Motors (GM) announced plans to bring its outsourced IT, which was about 90% of the total, back in-house and recruit 10,000 IT workers in the process. With pressure on large multinationals in the US to repatriate jobs, GM might not be the last.

According to a recent article in the Times of India,sources familiar with Procter & Gamble’s plans said the reason for the rethink is to have “direct control over crucial portions of the technology piece with implications for its competitive positioning."

Forrester analyst Lutz Peichert said the trend for large companies to bring work back in-house is largely the result of a view that the suppliers are not delivering. But he said the problem is that suppliers are doing what they are contracted to do but contracts often do not match what the business wants.

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Isn't this more appropriately described as moving from an external outsource provider to a captive offshore structure? Can't both be considered flavours of the same thing? I recently wrote an article discussing this amongst other outsourcing options. http://wp.me/p3aEpR-7x